Thursday October 30 Housing and Economic stories

TOP STORIES:

Companies start competing for bailout cash - (biz.yahoo.com) Insurance firms, auto companies and foreign banks petition for part of $700 billion bailout. The bailout is now the hottest lobbying game in town. Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history. The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession. These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well. The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday. Lobbying efforts are intensifying. The Financial Services Roundtable wrote Treasury officials on Friday requesting that the initiative to buy $250 billion in bank stock grow to cover insurers, auto companies, securities dealers and U.S. subsidiaries of foreign companies, including banks. The Treasury's plan is intended to bolster banks' tattered balance sheets and get them to resume making loans. As the Treasury now interprets it, these additional groups would not participate in the bank stock program. They could receive help from a separate part of the $700 billion rescue that will buy bad assets from financial institutions.

California law delays foreclosures - (www.latimes.com) A new law mandating delays in foreclosure actions may create a fleeting lull, but observers wonder whether it will lead to widespread mortgage workouts. The number of people losing their homes in California hit a record high of nearly 80,000 in the last three months, but a new state law appears to be dramatically slowing the foreclosure process -- at least for now. Loan default notices, the first step toward foreclosure, fell to 94,240 for the three months that ended Sept. 30. That's down sharply from the record 121,673 for the previous quarter, according to research firm MDA DataQuick. The big drop came in September, when a new state law took effect that blocks lenders from initiating foreclosure proceedings until 30 days after contacting the borrower or making "due diligence" efforts to do so. Default notices sank to 14,995 in September, after averaging more than 40,000 for each of the five preceding months. "That new law virtually slammed the brakes on mortgage default filings," said Andrew LePage, a DataQuick analyst. "We don't know yet how many of those loans will get worked out versus just shifted to late this year or early next year."

Las Vegas real estate 'is in the toilet' - (www.lvrj.com) Southern Nevada's housing market hasn't found its bottom and could suffer further in coming months, a panel of real estate experts said Thursday. At the quarterly Crystal Ball housing outlook at Texas Station, home builders, real estate brokers and marketing consultants talked about how to survive hard times as analysts shared fresh evidence of an ongoing housing correction. "The truth as I see it today is that the real estate market in Las Vegas is in the toilet," said Larry Murphy, president of real estate research firm SalesTraq. "And the sad probability is that it will stay in the toilet a while longer." That's because the city's housing market hasn't finished recovering from the excesses of 2004, 2005 and 2006. Top among those overindulgences: Local builders put up many more homes than the market needed, Murphy said. Annual new-home deliveries peaked in 2005 at 38,000, even as Southern Nevada required just 25,000 new homes to meet consumer demand. That overbuilt market is correcting. Builders will construct only 11,000 new homes in 2008. That should jump to 15,000 units in 2009, and return to 25,000 yearly sales in 2011, Murphy said. New-home construction isn't the only housing indicator that continues to adjust. Housing prices spiked in 2004 and 2005, thanks in part to easy money flooding the market in the form of interest-only mortgages and no-documentation loans. "You could get a loan for a dead horse" at the market's pinnacle, Murphy said. The funding surplus helped push the median price of a resale home from $140,000 in 2001 to more than $275,000 by early 2006, including a $100,000 gain from 2004 to 2006. Since then, the market has shed that $100,000 increase, and the median price rests where it was five years ago, at $186,000.

US Army Prepares To Attack America - (from www.patrick.net with source at www.armytimes.com) The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle, helping restore essential services and escorting supply convoys. Now they’re training for the same mission — with a twist — at home. Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks. It is not the first time an active-duty unit has been tapped to help at home. In August 2005, for example, when Hurricane Katrina unleashed hell in Mississippi and Louisiana, several active-duty units were pulled from various posts and mobilized to those areas. But this new mission marks the first time an active unit has been given a dedicated assignment to NorthCom, a joint command established in 2002 to provide command and control for federal homeland defense efforts and coordinate defense support of civil authorities.

Toll Brothers Chief on Housing Crash - (www.portfolio.com) Bob Toll scored big during the real estate bubble. Now, as sales stall and losses mount at Toll Brothers, the luxury homebuilder he helped found, he talks candidly about overbuilding, unwise land deals, greed-and how we can get out of this mess. On a bright morning in late July, the corporate headquarters of Toll Brothers, the luxury homebuilder that profited mightily from the latest housing boom, are uncannily silent. Outside chief executive Bob Toll’s office, swaths of cubicles sit vacant and bare, depopulated by deep layoffs. Inside, a Bloomberg terminal scrolls dismal updates: A new report says home prices are plummeting by record margins; in markets like Las Vegas and Miami, they’re off almost 30 percent. Toll Brothers’ stock is trading at about $20, down two-thirds from its 2005 high. Toll, compact and unassuming in a moss-colored suit, sits behind his desk in surroundings that seem incongruously modest for the man who stoked America’s demand for cathedral ceilings, Roman tubs, and four-car garages. We’re in a plain room overlooking a parking lot in an unremarkable suburban-Philadelphia office park. The only signs of excess are a helipad in the lot that the company laid down at the height of the boom to accommodate corporate choppers and the framed press clippings from those high-flying times that adorn the office’s walls. One headline reads BETTING AGAINST A HOUSING BUST. Toll, never one to mince words, is merciless as he dissects how his wagers went wrong. “These are bad times if there ever were,” he tells me. Perhaps no company better symbolizes the engorged consumption of the last real estate spree than Toll Brothers, which Bob founded with his brother, Bruce, in a one-room office four decades ago. During the height of the housing bubble, from 2004 to 2006, Toll Brothers reported nearly $16 billion in revenue, putting it in the top ranks of the industry. Its carefully cultivated brand—large, high-end suburban homes with all the latest must-have appliances—was among the most enviable in the business and catered to the yearning for bigger and better that the era’s easy credit allowed. Although Toll Brothers once had uncanny judgment, it has hit tough ground in the bust. Through the first nine months of 2008, Toll Brothers’ new sales contracts were down 49 percent from 2007, and 76 percent from 2005. The company reported a series of huge losses and has been forced to take massive write-downs—about $1.5 billion to date—on the value of its assets and landholdings. To mitigate the damage, Toll has laid off several thousand employees, nearly half his workforce, and walked away from numerous projects. Toll offers me no excuses and freely concedes that he made some foolish deals. “We boatloaded a bunch of real estate in ’04 and ’05 that is underwater today,” he says ruefully. Though Toll once prided himself on his ability to see a downturn coming, he admits to having been blindsided by this one’s startling swiftness and severity. Some have wondered whether the instincts that served him so well in the past were dulled during a long period of plenty. “His timing before this was always impeccable,” says Jeffrey Orleans, a Philadelphia-area homebuilder who has known Toll since childhood and admires him. “This recession, he’s getting a bit beat up like the rest of us.”

Farm-Credit Squeeze May Shrink Crops, Spur Prices, Food Crisis - (www.bloomberg.com) The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries. Global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years. Harvests of corn and soybeans also are likely to fall, Basse said. Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent. ``The credit situation is worrying even the biggest and best farmers,'' said Brian Willot, 36, a former University of Missouri commodity analyst who now grows soybeans on 2,000 acres in Brazil. ``For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are higher.'' In Brazil, the world's third-biggest exporter of corn after the U.S. and Argentina, production may fall more than 20 percent because farmers can't get loans to buy fertilizer, said Enori Barbieri, a National Corn Producers Association vice president. The nation's coffee harvest, the world's largest, may drop 25 percent for the same reason, said Lucio Araujo, commercial director at farmer cooperative Cooxupe, located in Guaxupe.
Borrowing costs increased and farmers struggled to get loans after the worst financial crisis since the Great Depression made banks and grain processors, including Cargill Inc. and Archer Daniels Midland Co., less tolerant of risk. Minnetonka, Minnesota-based Cargill and Decatur, Illinois- based Archer Daniels, the world's largest grain processors, are among the crop buyers to halt financing for growers in Brazil, said Eduardo Dahe, who represents the companies as president of the National Association of Fertilizer Distributors.

Tech Finance Defaults Rise; More Makers Offer Loans - (online.wsj.com) Troubles are brewing in the technology-financing business, the credit that greases many technology sales. Defaults on tech financings, loans that allow companies to purchase computers, software and other products, have spiked this year. The problems are surfacing after years in which such loans flowed freely. Now the banks and specialty lenders that most tech companies rely on to finance customer sales are retrenching, and financing terms are getting tougher. Some big tech companies, such as International Business Machines Corp., Oracle Corp. and Cisco Systems Inc., are stepping into the void -- lending more of their own money to customers



OTHER STORIES:

U.S. Stock Futures Drop on Concern Global Economy Is Worsening - (www.bloomberg.com)
Emerging-Market Stocks, Currencies Drop; Hungary's BUX Slides - (www.bloomberg.com)
Yen Rises as Carry Trades Pared on Global Recession Concern - (www.bloomberg.com)
Asian stocks drop on recession fears - (www.ft.com)
Europe shares hit 5-1/2 year low on recession fears - (www.reuters.com)

Oil falls below $62 as investors eye weak demand - (www.ap.com)
Bank Bailout Does Not Help Housing - (www.nytimes.com)
Wasted? Bailout bill subsidizes rum - (www.politico.com)
KeyCorp, Capital One to receive cash gifts from taxpayers - (biz.yahoo.com)

Economic Crisis Around The Globe Continues - (Mish at globaleconomicanalysis.blogspot.com)
Wall Street workers leaving NYC for fresh start - (biz.yahoo.com)
Banks exploit legal loophole to seize houses in England - (business.timesonline.co.uk)
Tech tumbles amid market selloff - (money.cnn.com)
Let's give renters some credit - (www.denverpost.com)
Unintended Consequences - (www.dollardaze.org)
Bank Closing Information for Alpha Bank & Trust - (www.fdic.gov)
Stock valuations are low only if you have short memory - (www.marketwatch.com)

Deflating Housing Bubbles - How It Really Works - (www.scoop.co.nz)
How Defaults Are Tracked - (www.time.com)
CA Foreclosure Graph - (1.bp.blogspot.com)
Excellent Graphs From Merrill Lynch - (PDF - patrick.net)

Economic crisis hits as Brazil builds - (www.latimes.com)
Credit Crisis Slows Economy in Once-Hot Poland - (www.nytimes.com)
Kuwait moves to prop up major bank, eyes deposit guarantee as financial meltdown reaches Gulf - (www.chicagotribune.com)
Calpers Sells Stock Amid Liquidity Strains - (online.wsj.com)
Hedge Funds Slam 'Gates' on Their Edgy Investors - (online.wsj.com)

Treasuries Rise as Asian Stocks Slump, U.S. Futures Head Lower - (www.bloomberg.com)
Gold Drops as Stock Plunge Prompts Investors to Switch to Cash - (www.bloomberg.com)
GM Said to Ask for U.S. Treasury Aid in Chrysler Merger Talks - (www.bloomberg.com)